Technical Analysis of the FOREX Market | ForexGen Academy

In FOREX trading there are two common types of analysis that most traders utilize, they are

fundamental and technical analysis. Fundamental analysis attempts to predict currency movement based

off of political and economy indicators. Technical analysis uses historical economic information to

predict changes in the FOREX market. This is the first of two articles that will explore technical

analysis.

Technical Analysis is based on the following assumptions:

1. Price movements are a result of combined market forces. Political events, economic conditions,

seasonal fluctuations, supply and demand are all things that can effect currency prices. Technical

analysts do not concern themselves with why the market moves, they are only interested in the

movements themselves.

2. Currency prices on the FOREX market follow trends. Predictable consequences have been linked with

many recognized market patterns.

3. Historical trends can be used to predict current price movements. Data on the FOREX market has

been collected for the last 100 years, over that time certain patterns have become emergent. Human

psychology and the way people react to certain circumstances are the basis of these patterns.

Most traders consider technical analysis to be of critical importance even though they may also use

fundamental analysis to support and confirm the strategy suggested by technical analysis. Unlike

fundamental analysis technical analysis can be applied to many different currencies and markets at

the same time. Since fundamental analysis requires detailed knowledge of the economic and political

conditions of a certain country it is nearly impossible for any single trader to perform proper

fundamental analysis on more than a few countries.

For the beginning trader the complexities of technical analysis may seem overwhelming and they may

even wonder if it is actually necessary. If you wish to be successful at FOREX trading you must have

a strategy. Any strategy can work but technical analysis has been proven as a reliable and effective

method of predicting market changes. Many forces can effect currency prices though so technical

analysis is no guarantee, most successful traders utilize a combination of technical and fundamental

analysis.

Any quality online FOREX broker should be able to supply you with a large variety of online charts

for technical analysis. You can purchase in-depth professional charts, there is usually a monthly fee

involved in gaining access to this information. There is also free software available to help you

with charting. Charts provide different snapshots of timeframes and usually can also have analytical

overlays. These charts will provide a broad over view and can also be zoomed into the tick level.

Good charts are updated in real time. These may be available on your brokers site or could be part of

their software.

You should learn the market and study trends before for a period of time before you begin actively

trading. Most brokers will provide you with a practice account where you can place “paper trades”.

Paper trades are just practice trades where no real money is made or lost. They act just like a real

trade though so you can see exactly how your trade would have turned out if you had placed it for

real. This allows you to become familiar with your brokers system and software as well as learning

about the market and how it moves without risking any money while you learn.

The second part of this article will explore the various charts and technical indicators.
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